LVMH sales jumped despite fears of a global recession, with the owner of Louis Vuitton and Christian Dior benefiting from wealthy American tourists shopping in Europe for luxury goods.
In a sign of the enduring demand for pricey merchandise, sales of LVMH’s fashion and leather goods soared 22% on an organic basis in the third quarter, the company reported Tuesday. Analysts had expected a gain of 16%. Even so, the company said it will control spending as uncertainty persists.
LVMH Moet Hennessy Louis Vuitton SE, founded by French billionaire Bernard Arnault, is the first high-end group to report revenue for the three months ending September, making its earnings a closely-watched event for investors.
The results indicate that so far, the industry has avoided the squeeze on spending that other retailers and consumer-goods companies have faced amid a growing cost-of-living crisis. LVMH Chief Financial Officer Jean-Jacques Guiony said during a call with analysts that a recession expected by investors “hasn’t materialized in full swing yet.” In past down cycles, luxury customers have tended to react more to stock-market shocks rather than GDP slowdowns, he said.
Guiony warned against using the group’s results as a “proxy” for the general health of the economy. Unlike mass-market retailers, LVMH has the ability to pass cost increases to consumers, he said.
While LVMH has been able to increase prices on its goods this year, Guiony stopped short of laying out the company’s plans for 2023 amid a wider price discrepancy between the US and Europe.
Europe saw LVMH’s strongest organic revenue growth in the third quarter, rising 36% helped by visiting Americans, who have splurged on trips to Europe in recent months.
Japan and the US followed Europe in organic sales growth, which strips out items such as the impact of exchange rates. Asia, excluding Japan, lagged the other regions, posting 6% growth after seeing a drop in the previous three months amid lockdowns in China.
Despite the expansion of sales, LVMH said it’s not immune to the wider economic distress and pledged to keep a tight rein on costs and only invest selectively. That was a change of tone for the company -- in past quarters, outlook has tended to focus on growth prospects.
Even so, high-end consumers have yet to suffer the impact of higher inflation and lower macro-economic growth, said Bernstein analyst Luca Solca.
“The relief of getting out the pandemic alive has trumped any bad news, as consumers who can embrace a ‘carpe diem’ attitude,” he said in a note to clients. “Nobody wants to be the richest person in the graveyard.”
Even though conditions improved in China, which has implemented strict pandemic lockdowns, the group’s brands aren’t yet operating normally there, Guiony said. Sales of Louis Vuitton were “more or less flat” during the third quarter, he said.
Flavio Cereda, an analyst at Jefferies, said the results were positive, but there’s still uncertainty on the trajectory going forward.
“This is another beat from the post-pandemic winner,” Cereda wrote in a note to clients. But it’s still not clear “whether we are witnessing a last hurrah ahead of a prolonged period of sequential deceleration with China remaining far more volatile than expected,” he added.
©2022 Bloomberg L.P.
